January 1, 2014--Federal flood insurance program drowning in debt. Who will pay? (Water World)

Millions of American property owners get flood insurance from the federal government, and a lot of them get a hefty discount. But over the past decade, the government has paid out huge amounts of money after floods, and the flood insurance program is deeply in the red. Congress tried to fix that in 2012 by passing a law to raise insurance premiums. Now that move has created such uproar among property owners that Congress is trying to make the law it passed disappear. The moral hazard of subsidizing risk is, we're going to rebuild right where we were, just the way it was, and we're going to get wiped out. Caught in the middle is Craig Fugate, FEMA administrator. FEMA provides food, shelter, money and pretty much whatever people need after a disaster. But before a disaster, FEMA helps with flood insurance — cheap flood insurance. You can buy a FEMA flood insurance policy for about half the "actuarial" rate private insurers would offer. (The actuarial rate more accurately reflects the value of a property at risk.). But now FEMA has a problem. "We are $24 billion in debt," says , who directs FEMA. Fugate delivered that bit of news to Congress' House Financial Services Committee in Washington, D.C., recently, as he tried to make the case for raising insurance rates.

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